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CA Foundation · Accounting · Inventories

Under AS 2, the financial statements should disclose the total carrying amount of inventories. How should this amount be presented?

Inventories must be shown with a classification appropriate to the enterprise, such as raw materials, work-in-progress, finished goods, stock-in-trade, and stores and spares. A single undivided total, or classification by supplier, does not satisfy the AS 2 disclosure requirement.

  1. AAs one single figure without any classification
  2. BClassified appropriately, such as raw materials, work-in-progress, finished goods, stores and spares, in a manner suited to the enterpriseCorrect
  3. COnly as finished goods, since other items are not inventories
  4. DClassified only by the supplier from whom purchased

Explanation

AS 2 requires disclosure of the total carrying amount of inventories classified in a manner appropriate to the enterprise. Common classifications are raw materials and components, work-in-progress, finished goods, stock-in-trade, stores and spares, and loose tools. A single undivided figure does not meet this requirement.

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